We are transparent about the fact that there is no tangible benefit to bidding.

If only the winner pays, it's just a silly game. But when the losers also pay, it becomes a genuinely abusive exploit of human irrationality which most people are not aware of. Please take it down.

http://www.mediate.com/articles/noll1.cfm

http://www.heretical.com/pound/dollarl.html

http://www.pbs.org/wgbh/nova/body/mind-over-money.html

Except none of those are good analogies to what's going on here, where people aren't actually bidding on something of monetary value. I find it hard to buy your argument that this is in any way unethical.

The losers are winners until another winner comes along.

Lots of huge businesses are based on irrationality. Cigarettes, gambling, etc. A fool and their money are easily parted.

And those businesses are accordingly regulated by society. But good luck trying to foster that winner-takes-all free-market world of yours. I'm sure it'll be a real blast.